Baldwin quizzed the Nobel prize winning economist and professor on the financial crisis, Reaganomics, growing up in Indiana, and what he sees in students now.

On the biggest mistake made during the financial crash

Where Bush and Obama made a fundamental mistake during the financial crash. Stiglitz said this was a political and economic mistake because they didn't differentiate between saving the banks and between saving the bankers and bankers shareholders and bondholders.

This is because Americans thought billions were going into save the bankers, their shareholders and bondholders without any constraint on how that money was going to be used. The biggest mistake they made was they gave them money to recapitalize and lend but then said you don't have to use that to recapitalize and lend you can use that money to pay dividends or bonuses. Instead they could have forced them to lend to small and medium enterprises (SMEs).

Stiglitz went on to say that the bankers instilled fear that banks would never be able to get private money and that people would leave banking, according to Stiglitz.

On bankers and mortgages

"They were engaged in predatory lending and discriminatory lending, ... they went after the poorest, least financially sophisticated Americans and they tried to move the money from the bottom of the pyramid to the top in a way that was unconscionable."

Baldwin: "You must be a profound critic of the ratings agencies"

In "financial alchemy" you take a bundle of mortgages that should be F rated and you put together them and you convert bad mortgages into an A rated security, according to Stiglitz.

Baldwin compared it to playing in the NFL except the referee "won't throw the flag because the ref isn't working for the league because some refs work for each team."

On growing up in Indiana

"I'd grown up in Gary Indiana which was in some ways an amazing industrial town in the southern shores of Lake Michigan ...it typified in many ways America of the 20th century and you saw both the strengths but also the weaknesses."

Stiglitz said he saw an economic system that worked for some but not for others and he saw a lot of discrimination and this made him turn from physics to economics.

Baldwin: Do the most sophisticated minds in your field view the bubbles like people in California view the San Francisco earthquake, as a total anomaly?

In the history of capitalism there have been many bubbles. With each bubble they think "those guys are very stupid, we're smarter".

Baldwin: What did Reaganomics mean to you then what does it mean to you now?

"I saw Reaganomics as perhaps another act in a long-standing battle about the appropriate balance between markets and government. And Reagan came in and tried to put his hand on side of that balance and say lets get rid of government lets just let markets rip. ...Just ordinary greed."

Stiglitz said we need more regulation and added that the if the Fed had implemented regulations they had authority to regulate we would have avoided the crisis.

After they collapsed, the government started to use Fannie Mae and Freddie Mac in part to bailout private banks, "they became part of the resolution mechanism transferring money from the public sector to the private sector". You can't look at some of the things after their collapse in 2008 to make inferences about the lending they were doing before.

On missing working for the government

When he worked for the government Stiglitz said he often started as early as 5 a.m. and sometimes they had meetings that ran till midnight. He said the notion that it is a 9 am - 5 am job is "absurd".

He also said the thing he liked about it was that he came across really difficult problems, figuring out what to do, "and then persuading others because we live in a democratic society."

Stiglitz said fewer students are going into academia. "One of the major misallocations of the financial sector is the misallocation of our scarcest resource our young people. Many of them could not resist the temptation of these out-sized bonuses."

Stiglitz said while many didn't think of it as Lloyd Blankfein but the lure of money was irresistible. But more are seeing problems of the financial sector now he said.